2017 REIT Executive Compensation Trends

Compensation and Corporate Governance Report and Analysis

FTI Consulting reviewed and analyzed compensation-related disclosure in the 2017 proxy statements for the top 150 REITs as determined based on year-end 2016 total capitalization values.

Excluded from the study are externally managed companies that do not directly pay cash compensation to their named executive officers (NEO), IPOs, REIT conversions and spinoffs that were completed after June 30, 2016. The top 150 REITs have been adjusted to include select hotel companies that have not elected to qualify for REIT status for tax purposes, but whose operations are comparable to other hotel REITs.

2016 Compensation Summary – Key Takeaways

Overall, 2016 total compensation increased over 2015 levels by approximately 5% at the median, with actual increases ranging from 2-7% depending on the position.

2016 increases were slightly larger than 2015 when pay increased by 3% at the median

Pay change by position reflected a tighter range than in 2015, with increases ranging from 1-9% at the median

REIT NEO pay increases have been muted over the past several years, which can in part be attributed to the increased prevalence of performance-based equity (down from +14% in 2010)

In 2016, compensation adjustments varied significantly sector by sector, with healthcare REITS receiving the largest increases (+20% for the CEO) and hotel/resort REITs receiving pay decreases (-1% for the CEO).

The utilization of performance-based equity continues to increase (although growth has slowed from previous years), with approximately 84% of REITs granting such equity for 2016 performance (up from 82% in 2015).

For REIT CEOs, approximately 50% of equity was allocated to performance shares in 2016 based on grant date fair value (GDFV)

Due to the leverage often built into such plans, the ultimate value realized under performance-based awards may be significantly more (or less) depending on performance

As compared to general industries, REITs received significantly fewer negative voting recommendations from Institutional Shareholder Services (ISS) with only 5.8% of self-managed REITs receiving an Against voting recommendation as compared to 12.3% of companies in the Russell 3000.

REIT Say-on-Pay approval rates were similar to the results of the Russell 3000